Guilt, and guilt by association

The thirtieth chapter of a landmark report into NSW political corruption begins with a blunt assertion in bold purple: “The Obeids – a problem that must be ‘fixed’."

The Independent Commission Against Corruption was sketching the problem facing a group of businessmen, rather than giving the Labor Party a hint. But in a political sense, it was a notorious ALP “fixer" who created the problem plaguing the country’s oldest party.

Graham Richardson
, the former head of the ALP’s tainted NSW branch and later senator and senior cabinet minister in the Hawke and Keating governments, sponsored
Eddie Obeid
to enter the state upper house in 1991.

So began Obeid’s 20-year career on Macquarie Street as a short-lived minister and, more significantly, as a powerbroker in Labor’s powerful Right faction, culminating on Wednesday in a finding of corruption and potential criminal charges.

“So there it is! Look no further – I am to blame. The buck stops here," Richardson wrote unrepentantly in the News Corp press on Friday.

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Obeid, who joined the ALP in 1972, emigrated to Australia from northern Lebanon. By the 1970s he was a successful businessman and “the Labor Party just didn’t have too many people in that category", Richardson said. After ICAC released its report on Wednesday, Obeid was banned from the party for life.

“I’ve been associated with Obeid for more than 30 years," Richardson said. “We have been friends throughout that period and while I may not have seen him so often in the past decade, we do speak on the phone.Yes, therefore I am guilty by association."

Plenty to go round

There is plenty of guilt by association to go around. In its damning report, ICAC found Obeid and his entrepreneurial middle son, Moses, had entered into a corrupt agreement with then mining minister
Ian Macdonald
in 2008 to create a lucrative mining tenement over the family’s rural property near Mudgee.

Macdonald gave inside information to the two men about a tender for a coal licence over the property, ICAC said.

All three face a potential criminal charge of conspiracy to defraud the state.The Obeids have already made $30 million from the decision and stood to make millions more.

Macdonald also faces a potential charge of misconduct in public office, while Obeid senior and his son could be charged with aiding and abetting him. It was an indignant Eddie Obeid who fronted the media on Thursday outside his Hunters Hill home, the palatial Passy built in the mid nineteenth century for the French Consul to Sydney.

Senior ALP figures had already scrambled to distance themselves from the ICAC report and damn Obeid as a political rogue.

Obeid took aim at two of them, NSW Labor’s parliamentary leader,
John Robertson
, and the head of the state branch of the party, Senate aspirant
Sam Dastyari
.

“These people wore out the carpet in my office when they wanted something," he said.

“I can’t believe these people who I mentored, I got them their jobs, they don’t give me the benefit that every other Australian has – innocent until proven guilty."

Disproportionate power

Obeid excels at the art of the devastating name-drop. During his stint in ICAC’s witness box in February, he named Robertson, federal Immigration Minister
Tony Burke
, former communications minister
Stephen Conroy
and former senator
Mark Arbib
among the party luminaries who had enjoyed the Obeid family’s largesse at their ski chalet at Perisher.

Others are clear beneficiaries of Obeid’s political support and suffered from the withdrawal of it.

While he was at pains to play down the extent of his influence over the making and breaking of premiers and cabinet ministers, ICAC heard the powerful Labor Right sub-faction Obeid led wielded “disproportionate power" over the whole of the state government.

Dubbed the Terrigals, after the central coast holiday spot where they first met, the sub-faction’s power derived from its control of more than half the votes in the right wing caucus, which dominated the government.

The Terrigals anointed a succession of NSW premiers –
Morris Iemma
,
Nathan Rees
and
Kristina Keneally
– and was instrumental in the downfall of both Iemma and Rees. The latter had dumped Macdonald and Right powerbroker
Joe Tripodi
from the cabinet shortly before he was axed as leader.

Rees told The Australian Financial Review earlier this year the party’s culture needed tobe changed by opening up decision-making to individual members, including the selection of the parliamentary leader and party officials.

Entrenched power

He said changes aimed at cleaning up the ALP’s scandal-plagued NSW branch, which were announced by Prime Minister
Kevin Rudd
last month and include banning property developers from standing as candidates, would not by themselves prevent people such as Obeid and Macdonald holding public office but were a necessary first step.

ICAC noted in its report that by 2008 Obeid’s power was “entrenched".

It said Iemma’s evidence to the ­corruption watchdog made plain that Obeid’s “position of influence was based on a network of relationships that, over a number of years, had been carefully cultivated and developed while he was a leader of the Terrigals.

“He was perceived as a person of power and influence and that perception, itself, caused his power and influence to grow."

It is only now that the full extent of his power is starting to be revealed. The number of associates at risk of claims of guilt by association – which is, without proof of any wrongdoing, no more than a damaging perception – appears to be growing by the day.

Closer scrutiny

ICAC is reportedly taking an interest in other Obeid-related business interests that may have been borne of the former MP’s substantial political influence, including three lucrative Circular Quay leases that were controlled by the family.

Tripodi was ports and waterways minister at the time the leases were renewed for 10 years in 2009.

The Obeids’ alleged stake in infrastructure company Australian Water Holdings, which piqued the interest of the corruption watchdog earlier this year, may also attract closer scrutiny.

It holds a lucrative 25-year contract with the state-owned utility Sydney Water, which was granted under the O’Farrell Coalition government in NSW.

Liberal Senator
Arthur Sinodinos
was chairman of the company from November 2010 to November 2011. He was replaced by former NSW Labor treasurer
Michael Costa
, who has since resigned. A former NSW Liberal Party president, Sinodinos told parliament in March he was unaware the company was “financially linked to the Obeid family’’.

An inquiry into Australian Water would create an “Obeid problem" across party lines, from a reputational standpoint alone. It’s not a problem easily fixed – just ask Labor.